Cameron – Schlumberger JV Shifts Subsea Currents

Cameron and Schlumberger announced this morning the formation of OneSubsea, a 60/40 joint venture partnership that will focus on manufacturing and developing subsea products and services worldwide.

Cameron will contribute its existing subsea division and receive $600 million from Schlumberger. It will also act as operator. For its part, Schlumberger will contribute its Framo, Surveillance, Flow Assurance and Power and Controls businesses.

The partnership is expected to benefit from Schlumberger’s expertise in subsea processing and platform integration and Cameron’s position in subsea flow and pressure control.

As we have written previously, the products that today’s supplier base provides customers in the subsea are rated materially lower by customers than most of the other segments EnergyPoint Research tracks in its independent surveys.

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From our standpoint, the move by Cameron and Schlumberger move should benefit customers by combining the subsea capabilities of two of the industry’s most well-regarded names in a segment that needs to see both performance and standards rise.

We also believe the move, to some extent, represents evidence of Schlumberger taking steps to provide greater focus in its respective businesses, continued evidence of a reversing out of the several-year trend toward bundling that our data have shown to be generally unrewarding for customers. The structure of deal is certainly reminiscent of Schlumberger’s successful M-I Swaco JV with Smith International.

We suspect customers will welcome the JV, if for no other reason than it provides greater competitive pressures upon supplier standards and performance in the choppy subsea segment. The financial implications to Cameron and Schlumberger of the JV, while potentially material, seem less significant than the financial and strategic implications for certain competitors.

Accordingly, we see potential competitive risks for Dril-Quip and FMC Technologies, both of whom derive significant portions of their earnings from subsea product lines. Aker Solutions, National Oilwell Varco and GE Oil & Gas could also see their subsea market shares impacted.